Minding Ag's Business

Money in the Bank

Only a fraction of the crops eligibile for YE opted for coverage in 2015, but most would have benefitted by automatically upping their APH and coverage per acre.

Farmers are overlooking an easy way to boost their crop insurance coverage in a year when every dollar counts: Yield Exclusion, a feature designed to "forgive-and-forget" years of devastating Texas droughts, actually has nationwide benefits for everyone from sorghum to sunflower growers. For corn growers, YE frequently boosted eligible 10-year Actual Production Histories (APH) by 10 bu. per acre, a bump that could mean extra money in the bank this fall.

"It's hard to understand why you would not take YE if you're eligible," says Gary Schnitkey, a University of Illinois economist, the same advice he gave growers when offered APH trend-adjusted yields several years ago. "It offers a higher guarantee and premiums will never be higher for the same coverage with YE than without. Particularly in this environment when most of the per-acre guarantees are below cost of production, getting as much coverage as you can seems to be a prudent thing."

Others liken YE to "erasing" the Ds and Fs on a college report card, so your grade point average doesn't suffer. To be eligible for APH Yield Exclusion, your county's yield for a crop year must have been at least 50% below its 10-year average.

Obviously, county yields could bomb while yours floated above average, so "forgiveness" isn't necessary. But other crop insurance experts are frustrated that only 17% of insured acres elected YE in 2015, even though 66% of insured corn acres were eligible. Some 95% of grain sorghum and sunflower acres were also eligible, but only 17% and 9% of those respective crops insured acres enrolled.

"YE is something you absolutely have got to look at," says Jason Alexander, vice president of crop insurance for Louisville-based Farm Credit Mid-America. Take a producer in Shelby County, Kentucky who had the chance to exclude his 49 bu. yield in 2005 on one farm unit.By excluding that single year, his approved yield went from 165 to 175 bu. on that farm, which in turn improved his guarantee by 8 bu. at an 80% coverage level.Schnitkey also found many Illinois corn growers eligible for a 10 bu. bump as well.

"This equates to an additional revenue coverage of $30.88 an acre with a 2016 spring price of $3.86," Alexander says.

Given that corn prices have plummeted since last March, it's likely that growers with 80% or 85% policies could trigger indemnities even without a yield loss or even with a decent crop this year, he adds. The higher your acre guarantee, the better your chance of collection. (See DTN's "No Yield Loss Necessary" https://www.dtnpf.com/…)

"Cotton growers in states like Texas, Virginia and the Carolinas left a ton of money on the table" by not electing YE, Alexander says. "It would have made a huge difference in their guarantees."

Alexander blames the fact that YE's 2015 debut occurred at the same time as a slew of other new Farm Bill decisions.

"There wasn't enough time in the day for agents to explain all of those things at once," Alexander says. "However, at Farm Credit Mid-America, about 75% of eligible policies have elected YE now, so the message is getting out."

Now would be a good time to review your coverage with your agent and work through the numbers on all your farms, Alexander adds. What you don't know could be hurting you.

For more background on YE, go to http://www.rma.usda.gov/…

Follow Marcia Taylor on Twitter @MarciaZTaylor


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